[Federal Register Volume 61, Number 92 (Friday, May 10, 1996)]
[Notices]
[Pages 21489-21498]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-11796]



-----------------------------------------------------------------------

DEPARTMENT OF JUSTICE
Antitrust Division


United States of America v. Woman's Hospital Foundation & Woman's 
Physician Health Organization; Proposed Final Judgment and Competitive 
Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation, and a Competitive Impact Statement have been filed with 
the United States District Court for the Middle District of Louisiana 
in United States of America v. Woman's Hospital Foundation & Woman's 
Physician Health Organization, Civil No. 96-389-BM2.
    The complaint alleges that defendants entered into an agreement 
that unreasonably restrained competition among physicians in the Baton 
Rouge, Louisiana area, in violation of Section 1 of the Sherman Act, 15 
U.S.C. 1. The complaint also alleges that Woman's Hospital Foundation 
willfully attempted to maintain and maintained its monopoly in 
inpatient obstetrical services in the Baton Rouge, Louisiana area, in 
violation of Section 2 of the Sherman Act, 15 U.S.C. 2.
    The proposed Final Judgment, agreed to by the defendants, prohibits 
defendants' unlawful agreement and the additional acts of Woman's 
Hospital Foundation that gave rise to the violations of Section 2.
    Public comment on the proposed Final Judgment is invited within the 
statutory 60-day comment period. Such comments and responses thereto 
will be published in the Federal Register and filed with the Court. 
Comments should be directed to Gail Kursh, Chief; Health Care Task 
Force; United States Department of Justice; Antitrust Division; 325 7th 
Street, NW.; Room

[[Page 21490]]

400; Washington, DC, 20530 (telephone: 202/307-5799).
Rebecca P. Dick,
Deputy Director, Office of Operations, Antitrust Division, U.S. 
Department of Justice.

United States District Court for the Middle District of Louisiana

    In the matter of: United States of America, plaintiff, vs. 
Woman's Hospital Foundation and Woman's Physician Health 
Organization, Defendants. Civil Action No: 96-389-B-M2; Filed: April 
23, 1996.

Stipulation

    The parties, by their attorneys, stipulate that:
    1. The Court has jurisdiction over the subject matter of this 
action and over each party, and venue is proper in the Middle District 
of Louisiana.
    2. The Court may file and enter a Final Judgment in the attached 
form upon the Court's motion or the motion of a party, after compliance 
with the Antitrust Procedures and Penalties Act (15 U.S.C. 16), without 
further notice to any party or other proceedings, if plaintiff has not 
withdrawn its consent, which it may do before the entry of the proposed 
Final Judgment by serving notice on defendants and filing that notice 
with the Court.
    3. Defendants are bound by the provisions of the proposed Final 
Judgment before its approval by the Court and will take the following 
actions pursuant to this Stipulation:
    a. Notify in writing, within 20 days of the filing of this 
Stipulation, each physician who has participated in Woman's Physician 
Hospital Organization (WPHO) that he or she is free at all times to 
communicate, negotiate, and contract independently from WPHO with any 
payer on any terms;
    b. While forming or employing a messenger model or forming a 
qualified managed care plan before entry of the proposed Final 
Judgment: (1) provide a copy of the proposed Final Judgment to each 
owner or member of the organization forming the messenger or qualified 
managed care plan and to each physician potentially participating in 
the messenger model, and (2) require, as a condition precedent to each 
physician's ownership, membership or participation, the physician to 
affirm in writing that he or she has read and understands the proposed 
Final Judgment and agrees to be bound by it;
    c. Notify in writing, within 20 days of the filing of this 
Stipulation, each payer with which WPHO then has a contract that the 
payer may cancel or renegotiate the contract and that each physician 
who has participated in WPHO is free at all times to communicate, 
negotiate, and contract on any terms with such payer independently 
from, and without consultation with, WPHO;
    d. Notify in writing, before entry of the proposed Final Judgment, 
each payer when it initially discusses (i) using the services of a 
messenger that would be subject to the proposed Final Judgment or (ii) 
contracting with a qualified managed care plan that would be subject to 
the proposed Final Judgment, that each participating physician is free 
at all times to communicate, negotiate, and contract with such payer 
independently on any terms, without consultation with the messenger or 
qualified managed care plan; and
    e. Distribute a copy of the proposed Final Judgment to all 
directors and officers of defendants within 20 days of the filing of 
this Stipulation.
    4. Within 30 days after the filing of this Stipulation, each 
defendant shall provide to plaintiff a certified statement describing 
the notifications and distributions of the Final Judgment it made under 
paragraph 3 of this Stipulation.
    5. Each defendant shall give plaintiff at least 30-days notice of 
any proposed (a) dissolution of that defendant, (b) sale or assignment 
of claims or assets of that defendant resulting in a successor person, 
or (c) change in corporate structure of that defendant that might 
affect its compliance obligations under the proposed Final Judgment.
    6. If plaintiff withdraws its consent, or if the Court does not 
enter the proposed Final Judgment under the terms of the Stipulation, 
this Stipulation shall be of no effect whatsoever, and the making of 
this Stipulation shall be without prejudice to any party in this or in 
any other proceeding.

    FOR PLAINTIFF UNITED STATES OF AMERICA:

Anne K. Bingaman,
Assistant Attorney General.

Joel I. Klein,
Deputy Assistant Attorney General.

Rebecca P. Dick,
Deputy Director, Office of Operations.

Gail Kursh,
Chief, Health Care Task Force.

Mark J. Botti, Steven Kramer, Pamela C. Girardi,
Attorneys, U.S. Department of Justice, Antitrust Division, Health 
Care Task Force, Room 450, Liberty Place Bldg., 325 7th Street, NW., 
Washington, DC 20530, (202) 307-0827.

    FOR DEFENDANT WOMAN'S HOSPITAL FOUNDATION:

John J. Miles, Bruce R. Stewart,
Ober, Kaler, Grimes & Shriver, Fifth Floor, 1401 H Street, NW., 
Washington, DC 20005, (202) 326-5008.

    FOR DEFENDANT WOMAN'S PHYSICIAN HEALTH ORGANIZATION:

Toby G. Singer,
Jones, Day, Reavis & Pogue, 1450 G Street, NW., Washington, DC 
20005, (202) 879-4654.

John J. Miles.

United States District Court for the Middle District of Louisiana

    In the matter of: United States of America, Plaintiff, vs. 
Woman's Hospital Foundation and Woman's Physician Health 
Organization, Defendants. Civil Action No: 96-389-B-M2; Filed: April 
23, 1996.

Final Judgment

    Plaintiff, the United States of America, having filed its Complaint 
on April 23, 1996, and plaintiff and defendants, by their respective 
attorneys, having consented to the entry of this Final Judgment without 
trial or adjudication of any issue of fact or law, and without this 
Final Judgment constituting any evidence against or an admission by any 
party regarding any issue of fact or law;
    NOW, THEREFORE, before the taking of any testimony, and without 
trial or adjudication of any issue of fact or law, and upon consent of 
the parties, it is hereby ORDERED, ADJUDGED, AND DECREED:

I

Jurisdiction

    This Court has jurisdiction over the subject matter and each of the 
parties to this action. The Complaint states claims upon which relief 
may be granted against the defendants under Sections 1 and 2 of the 
Sherman Act, 15 U.S.C. 1 and 2.

II

Definitions

    As used in this Final Judgment:
    (A) ``Competing physicians'' means solo practitioners or separate 
physician practice groups in the same relevant physician market.
    (B) ``Consenting physician'' means physicians who have agreed, 
through implementation of Section V(B), to be bound by this Final 
Judgment.
    (C) ``Messenger model'' means the use of an agent or third party 
(``the messenger'') to convey to payers any information obtained from 
participating physicians about the prices or other competitively 
sensitive terms and conditions each physician is willing to accept from 
any payer, and to convey to physicians any contract offer made by a 
payer, where:

[[Page 21491]]

    (1) Pursuant to Section V(B), participating physicians have 
received actual notice of this Final Judgment and agreed in writing to 
be bound by it;
    (2) The messenger informs each payer at the outset of the 
messenger's involvement with the payer that the payer may refuse to 
respond to offers conveyed by the messenger or may terminate 
involvement with the messenger at any time and that participating 
physicians are free at all times to communicate, negotiate and contract 
on any terms with the payer independently from, and without 
consultation with, the messenger;
    (3) The messenger informs each participating physician when the 
physician first authorizes the messenger to carry messages to and from 
the physician and annually thereafter that the physician is free at all 
times to communicate, negotiate and contract on any terms with any 
payer independently from, and without consultation with, the messenger;
    (4) The messenger does not communicate to participating physicians 
regarding, or comment on, a payer's refusal to use or decision to 
discontinue using the messenger's services, other than to inform 
participating physicians that a payer has decided not to use the 
messenger's services;
    (5) The messenger conveys to participating physicians each and 
every offer that a payer delivers to the messenger unless (a) the offer 
is the payer's first offer and lacks material terms such that it could 
not be considered a bona fide offer, or (b) the messenger applies 
preexisting objective criteria, not involving prices or other 
competitively sensitive terms and conditions, in a nondiscriminatory 
manner (for example, refusing to convey offers of payers that refuse to 
pay a fee for conveying the offer, offers for plans that do not cover a 
certain minimum number of people, or offers made after the agent or 
messenger has conveyed a stated maximum number of offers for a given 
time period);
    (6) All communications by the messenger to participating physicians 
(other than communications to physicians in their capacity as directors 
or officers of an organization employing the messenger model) regarding 
fees, payers and contracts are in writing or recorded, except that the 
messenger may communicate orally on these subjects when the 
communication pertains to ministerial matters or when an individual 
physician initiates the communication and a written record of the date 
of, participants to and subject matter of the conversation is kept by 
the messenger;
    (7) Each participating physician agrees with the messenger not to 
discuss with competing physicians information on fees, contract terms 
and conditions, contract offers, or reactions to contract offers;
    (8) Each competing, participating physician makes a separate, 
independent, and unilateral decision to accept or reject a payer's 
offer;
    (9) Information on prices or other terms and conditions conveyed to 
payers is obtained by the messenger separately from each competing, 
participating physician;
    (10) The messenger does not negotiate collectively for 
participating physicians, disseminate to any physician the messenger's 
or any other physician's views or intentions as to an offer, or 
otherwise serve to facilitate any agreement among competing physicians 
on prices or other terms and conditions;
    (11) The messenger does not enter into contracts with payers 
unless, in executing contracts on behalf of any competing, 
participating physician, it acts consistently with the foregoing 
requirements of this Section II(C), no contract grants it the authority 
to cancel the contract prior to the stated term of the contract, and 
each competing physician makes separate, independent and unilateral 
decisions whether to cancel or renew contracts; and,
    (12) The messenger maintains all documents received or created by 
it, relating to contracting, fees or physician participation, other 
than invoices, receipts and personnel records, for the duration of this 
Final Judgment.
    As long as the messenger acts consistently with the foregoing, it 
may:
    (1) Convey to a participating physician objective information about 
proposed contract terms, including comparisons with terms offered by 
other payers;
    (2) Solicit clarifications from a payer of proposed contract terms, 
or engage in discussions with a payer regarding contract terms other 
than prices and other competitively sensitive terms and conditions;
    (3) Convey to a participating physician any response made by a 
payer to information conveyed or clarifications sought;
    (4) Convey to a payer the acceptance or rejection by a 
participating physician of any contract offer made by the payer; and,
    (5) At the request of the payer, provide the individual response, 
information, or views of each participating provider concerning any 
contract offer made by such payer.
    (D) ``Participating physicians'' means those physicians who own an 
interest in or authorize a qualified managed care plan to negotiate or 
contract on their behalf with payers, or who authorize a messenger to 
carry offers, acceptances and other messages between themselves and 
payers.
    (E) ``Person'' means any natural person, corporation, firm, 
company, sole proprietorship, partnership, joint venture, association, 
institute, governmental unit, or other legal entity.
    (F) ``Pre-existing physician practice group'' mean a physician 
practice group existing as of the date of the filing of the Complaint 
in this section. A pre-existing physician practice group may add any 
physician to the group after the filing of the Compliant, without 
losing the status of ``pre-existing'' under this definition for any 
relevant physician market, provided the physician was not offering 
services in the relevant physician market before joining the group and 
would not have entered that market but for the group's efforts to 
recruit the physician.
    (G) ``Qualified managed care plan'' means an organization that is 
owned, in whole or in part, by either or both of the defendants, offers 
a provider panel and satisfies each of the following criteria:
    (1) Its owners or not-for-profit members (``members'') who compete 
with other owners or members or with subcontracting physicians 
participating in the plan, (a) share substantial financial risk for the 
payment of services provided pursuant to contracts negotiated or 
executed by it and (b) in combination with the owners and members of 
all other physician networks in which Woman's Hospital, WPHO or any of 
them own an interest constitute no more than 30% of the physicians in 
any relevant physician market, except that it may include any single 
physician, or any single preexisting physician practice group for each 
relevant physician market, so long as Woman's Hospital, WPHO and they 
do not own an interest in another physician network;
    (2) Its participating physicians include no more than 30% of the 
physicians in any relevant physician market unless, for those 
subcontracting physicians whose participation increases the panel 
beyond 30%, (a) there is a sufficient divergence of economic interest 
between such subcontracting physicians and the plan's owners or members 
to cause the owners or members to bargain down the fees of the 
subcontracting physicians because the extent of the owners' or members' 
profits under each payer contract depends directly on the fees

[[Page 21492]]

negotiated with the subcontracting physicians, (b) the contractual 
relationship between owners or members and such subcontracting 
physicians precludes a higher rate for subcontracting physicians 
resulting in the same or higher profits for owners or members, (c) the 
plan does not directly pass through to a payer liability for making 
payments to such subcontracting physicians, (d) a most-favored-nations 
clause or any similar term does not apply to the relationship between 
the plan and such subcontracting doctors, and (e) the plan does not 
compensate such subcontracting physicians in a manner that 
substantially replicates ownership in the organization;
    (3) It does not facilitate agreements between competing physicians 
concerning charges, or other terms and conditions, relating to payers 
not contracting with the organization;
    (4) Pursuant to Section V(B), its owners or members have received 
actual notice of this Final Judgment and agreed in writing to be bound 
by it; and
    (5) It is not operated with the purpose or effect of maintaining or 
increasing physician fees.
    The organization may at any given time exceed the 30% limitation as 
a result of any physician exiting any relevant physician market or the 
addition of any physician not previously offering services in a 
relevant physician market who would not have entered that market but 
for the organization's efforts to recruit the physician into the 
market; however, the organization may not exceed the 30% limitation by 
any greater degree than is directly caused by such exit or entry.
    (H) ``Relevant market'' means, unless defendants obtain plaintiff's 
prior written approval of a different definition, physicians who 
regularly practice (a) in obstetrics or gynecology in the Baton Rouge 
area, or (b) services other than obstetric or gynecologic, in any other 
relevant market, as defined by federal antitrust principles.
    (I) ``Substantial financial risk'' means financial risk achieved 
through capitation or the creation of significant financial incentives 
for the group to achieve specified cost-containment goals, such as 
withholding from all members a substantial amount of the compensation 
due to them, with distribution of that amount to the members or owners 
only if the cost-containment goals are met.
    (J) ``Woman's Hospital'' means Woman's Hospital Foundation, each of 
its divisions, parents, subsidiaries, and affiliates, each other person 
directly or indirectly, wholly or in part, owned or controlled by it, 
and each partnership or joint venture to which any of them is a party, 
each of the foregoing person's successors, and all of their directors, 
officers, and employees.
    (K) ``WPHO'' means Woman's Physician Health Organization, each of 
its successors, divisions, parents, subsidiaries, and affiliates, each 
other person directly or indirectly, wholly or in part, owned or 
controlled by it, and each partnership or joint venture to which any of 
them is a party, and all of their directors, officers, and employees.

III

Applicability

    This Final Judgment applies to Woman's Hospital and WPHO, to all 
consenting physicians, and to all other persons who receive actual 
notice of this Final Judgment by personal service or otherwise and then 
act or participate in active concert with any or all of the defendants.

IV

Injunctive Relief

    (A) Woman's Hospital and WPHO are enjoined from:
    (1) Directly or through any agent, organization or other third 
party, expressing views on, or conveying information on, competing 
physicians' prices or other terms and conditions, or negotiating on 
behalf of competing physicians;
    (2) Owning an interest in, contracting with, or controlling one or 
more organizations, including WPHO, in which individually or 
cumulatively participating physicians constitute more than 30% of the 
physicians in any relevant market;
    (3) Owning an interest or participating in any organization that 
directly, or through any agent, organization or other third party, 
sets, expresses views on, or conveys information on prices or other 
terms and conditions for competing physicians' services, or negotiates 
for competing physicians unless the organization complies with 
paragraphs (2) through (6) of this Section IV(A) as if those paragraphs 
applied to that organization;
    (4) Precluding or discouraging any physician from negotiating or 
contracting with any payer;
    (5) Providing disincentives for, or agreeing with, any physician 
not to deal with competitors of Woman's Hospital or WPHO, provided that 
nothing in this Final Judgment prohibits Woman's Hospital from entering 
into exclusive contracts for anesthesiology, radiology, pathology, 
neonatalogy, and perinatalogy services to the extent reasonably 
necessary to assure quality of care at the Hospital;
    (6) Disclosing to any physician any financial or other 
competitively sensitive business information about any competing 
physician, except as is reasonably necessary for the operation of a 
qualified managed care plan for which defendants have received prior 
written approval from the Department of Justice, provided that nothing 
in this Final Judgment shall prohibit the disclosure of information 
already generally available to the medical community or the public.
    (B) Each consenting physician is enjoined from:
    (1) Owning an interest or participating in any organization, 
connected in any way with Woman's Hospital or WPHO, that directly, or 
through any agent, organization or other third party, sets, expresses 
views on, or conveys information on prices or other terms and 
conditions, or negotiates on behalf of competing physicians, unless the 
organization complies with Section IV(A) of this Final Judgment as if 
that Section applied to that organization; and
    (2) participating in or facilitating any agreement among competing 
physicians on fees or other terms and conditions for physician 
services, including the willingness of physicians to contract on any 
terms with particular payers or to use facilities competing with 
Woman's Hospital's facilities, unless the competing physicians share 
substantial financial risk and the agreement is ancillary to the shared 
risk; provided that nothing in this paragraph IV(B)(2) applies to the 
participation of competing physicians in any managed care plan or 
network of such a plan not owned or controlled by Woman's Hospital or 
WPHO.
    (C) Woman's Hospital is enjoined from agreeing with any person 
affiliated directly or indirectly with any potential or actual 
competing facility to allocate or divide the market for, or set the 
price for, any service, including offering lower rates for inpatient 
services to any payer on the condition that the payer or any person 
affiliated with the payer not offer inpatient obstetrical services.
    (D) Nothing in this Final Judgment prohibits the defendants or the 
consenting physicians from
    (1) Forming, operating, owning an interest in, or participating in 
(a) a messenger model, or (b) a qualified managed care plan if 
defendants obtain prior written approval from the Department of 
Justice, which will not be withheld unreasonably; or
    (2) Engaging in activity delineating in the attached Safety Zones 
of Statements

[[Page 21493]]

5 and 6 of the 1994 Statements of Enforcement Policy and Analytical 
Principles Relating to Health Care and Antitrust.

V

Additional Provisions

    Woman's Hospital and WPHO shall:
    (A) Notify in writing each WPHO participating physician, within ten 
days of entry of this Final Judgment (unless such notification has 
already been given) and annually thereafter during the term of this 
Final Judgment, that the physician is free at all times to communicate, 
negotiate or contract on any terms with any payer independently from, 
and without consultation with, WPHO;
    (B) While forming or employing a messenger model or forming a 
qualified managed care plan, (1) provide a copy of the Final Judgment 
to each owner or member of the organization forming the messenger or 
qualified managed care plan and to each physician applying for 
participation in the messenger model, and (2) require, as a condition 
precedent to the physician's ownership or membership in the 
organization, or participation in a messenger model, the physician to 
affirm in writing that the physician has read and understands this 
Final Judgment and agrees to be bound by this Final Judgment;
    (C) Notify in writing, within ten days of entry of this Final 
Judgment (unless such notification has already been given), each payer 
with which WPHO then has a contract that the payer may cancel the 
entire contract and that each physician who has participated in WPHO is 
free at all times to communicate, negotiate, and contract on any terms 
with such payer independently from, and without consultation with, 
WPHO;
    (D) Notify in writing, within ten days of entry of this Final 
Judgment (unless such notification has already been given) each payer 
with which WPHO then has a contract, and during the term of this Final 
Judgment, each payer when it initially discusses using the services of 
a messenger subject to this Final Judgment or contracting with a 
qualified managed care plan subject to this Final Judgment, that each 
participating physician is free to communicate, negotiate or contract 
with such payer on any terms independently from, and without 
consultation with, the messenger or qualified managed care plan; and
    (E) Notify, as applicable, the plaintiff at least 30 days prior to 
any proposed (1) dissolution of a defendant, (2) sale or assignment of 
claims or assets of a defendant resulting in a successor person, or (3) 
change in corporate structure of a defendant that may affect compliance 
obligations arising out of this Final Judgment.

VI

Compliance Program

    Each defendant shall maintain a judgment compliance program, which 
shall include:
    (A) Distributing within 60 days from the entry of this Final 
Judgment, a copy of the Final Judgment and Competitive Impact Statement 
to all directors and officers;
    (B) Distributing in a timely manner a copy of the Final Judgment 
and Competitive Impact Statement to any person who succeeds to a 
position described in Paragraph VI(A);
    (C) Briefing annually in writing or orally those persons designated 
in Paragraphs VI (A) and (B) on the meaning and requirements of this 
Final Judgment and the antitrust laws, including penalties for 
violation thereof;
    (D) Obtaining from those persons designated in Paragraphs VI (A) 
and (B) annual written certifications that they (1) have read, 
understand, and agree to abide by this Final Judgment, (2) understand 
that their noncompliance with this Final Judgment may result in 
conviction for criminal contempt of court and imprisonment and/or fine, 
and (3) have reported violations, if any, of the this Final Judgment of 
which they are aware to counsel for the respective defendant; and
    (E) Maintaining for inspection by plaintiff a record of recipients 
to whom this Final Judgment and Competitive Impact Statement have been 
distributed and from whom annual written certifications regarding this 
Final Judgment have been received.

VII

Certifications

    (A) Within 75 days after entry of this Final Judgment, each 
defendant shall certify to plaintiff that it has given the 
notifications required by Section V and made the distribution of the 
Final Judgment and Competitive Impact Statement as required by 
Paragraph VI (A); and
    (B) For 10 years after the entry of this Final Judgment, on or 
before its anniversary date, each defendant shall certify annually to 
plaintiff whether it has complied with the provisions of Sections V and 
VI applicable to it.

VIII

Plaintiff's Access

    For the sole purpose of determining or securing compliance with 
this Final Judgment, and subject to any recognized privilege, 
authorized representatives of the United States Department of Justice, 
upon written request of the Assistant Attorney General in charge of the 
Antitrust Division, shall on reasonable notice be permitted:
    (A) Access during regular business hours of any defendant to 
inspect and copy all records and documents in the possession or under 
the control of that defendant relating to any matters contained in this 
Final Judgment;
    (B) To interview officers, directors, employees, and agents of any 
defendant, who may have counsel present, concerning such matters; and
    (C) To obtain written reports from any defendant, under oath if 
requested, relating to any matters contained in this Final Judgment.

IX

Jurisdiction Retained

    This Court retains jurisdiction to enable any of the parties to 
this Final Judgment to apply to this Court at any time for further 
orders and directions as may be necessary or appropriate to carry out 
or construe this Final Judgment, to modify or terminate any of its 
provisions, to enforce compliance, and to punish violations of its 
provisions.

X

Expiration of Final Judgment

    This Final Judgment shall expire ten (10) years from the date of 
entry.

XI

Public Interest Determination

    Entry of this Final Judgment is in the public interest.

    Dated: ______________________.

----------------------------------------------------------------------
United States District Judge

United States District Court for the Middle District of Louisiana

    In the matter of: United States of America, Plaintiff, vs. 
Woman's Hospital Foundation and Woman's Physician Health 
Organization, Defendants. Civil Action No: 96-389-BMZ.

Amended Competitive Impact Statement

    Pursuant to Section 2(b) of the Antitrust Procedures and Penalties 
Act, 15 U.S.C. 16(b)-(h) (``APPA''), the United States files this 
Competitive Impact Statement relating to the proposed Final Judgment 
submitted for entry in this civil antitrust proceeding.

[[Page 21494]]

I

Nature and Purpose of the Proceeding

    On April 23, 1996, the United States filed a civil antitrust 
complaint alleging that defendant Woman's Health Foundation (``WHF''), 
which owns and operates Woman's Hospital, and defendant Woman's 
Physician Health Organization (``WPHO''), with others not named as 
defendants, entered into an agreement and took other actions, the 
purpose and effect of which were, among other things, to reduce 
competition among obstetrician/gynecologists (``OB/GYNs'') and other 
doctors and prevent or delay the continued development of managed care 
in Baton Rouge, Louisiana (``Baton Rouge''), and to maintain willfully 
Woman's Hospital's monopoly in inpatient obstetric care, in violation 
of Sections 1 and 2 of the Sherman Act, 15 U.S.C. 1, 2. The Complaint 
seeks injunctive relief to enjoin continuance and recurrence of these 
violations.
    The United States filed with the Complaint a proposed Final 
Judgment intended to resolve this matter. Entry of the proposed Final 
Judgment will terminate this action, except that the Court will retain 
jurisdiction over the matter to interpret, enforce, or modify the 
judgment, or punish violations of its provisions.
    Plaintiff and both defendants have stipulated that the Court may 
enter the proposed Final Judgment after compliance with the APPA, 
unless prior to entry plaintiff has withdrawn its consent. The proposed 
Final Judgment provides that its entry does not constitute any evidence 
against, or admission by, any party concerning any issue of fact or 
law.
    The present proceeding is designed to ensure full compliance with 
the public notice and other requirements of the APPA. In the 
Stipulation to the proposed Final Judgment, defendants have also agreed 
to be bound by the provisions of the proposed Final Judgment pending 
its entry by the Court and to take certain corrective actions.

II

Practices Giving Rise to the Alleged Violations

    Woman's Hospital is the dominant provider of private inpatient 
obstetrical care in Baton Rouge. In the late 1980's, competition among 
doctors for participation in managed care plans created the opportunity 
for the entry of other Baton Rouge area hospitals into the market for 
inpatient obstetrical care. In 1991, General Health, Inc. (``General 
Health'') announced that it would build a hospital (the ``Health 
Center'') with 5 to 6 dedicated OB/GYN beds. Wonman's Hospital was 
particularly threatened by General Health's Center because General 
Health also owned Gulf South Health Plans, Inc. (``Gulf South''), the 
largest managed care plan in Baton Rouge. Once General Health's new 
facility achieved full-service status, Gulf South would have 
substantially more negotiating leverage with Woman's Hospital because 
Gulf South could employ the Health Center as a preferred hospital over 
Woman's Hospital in Gulf South's network.
    Women's Hospital entered into negotiations with General Health and 
offered to continue contracting with Gulf South if General Health would 
agree to stay out of the obstetrical business in Baton Rouge for the 
next 5 to 7 years. Woman's Hospital eventually retreated from this 
attempt to foreclose the Health Center from offering inpatient 
obstetrical services and took alternative steps to achieve the same 
result.
    Managed care plans could not use the Health Center's availability 
to obtain significant price concessions from Woman's Hospital, if 
Woman's Hospital could disrupt the competitive forces that would prompt 
the OB/GYNs on its medical staff to admit patients to the Health 
Center. Accordingly, in 1993, Woman's Hospital formed defendant WPHO, a 
physician-hospital organization, whose purpose at the time of formation 
was to establish a minimum physician fee schedule and serve as a joint 
bargaining agent on behalf of Woman's Hospital and these OB/GYNs. 
Woman's Hospital hoped to assure the continued ``loyalty'' of its OB/
GYNs through WPHO.
    WPHO developed a minimum fee schedule that listed fees for OB/GYNs 
that were substantially higher than the fees managed care plans were 
then paying OB/GYNs under individual contracts. Approximately 90% of 
the OB/GYNs delivering privately insured babies in the Baton Rouge area 
committed to WPHO after reviewing this fee schedule.
    WPHO then signed contracts with a number of managed care plans, two 
of which were attempting to set up operations in the Baton Rouge area. 
Each of these new plans first attempted to contract directly with OB/
GYNs independently of WPHO but was unsuccessful. In addition, Gulf 
South was forced to accept OB/GYNs on its panel with whom it had not 
previously contracted and to accept the WPHO fee schedule for all OB/
GYNs in WPHO, which was significantly higher than the fee schedule Gulf 
South had previously applied to its participating physicians.
    Based on the facts described above and those set forth more fully 
in the Complaint, the Complaint alleges that the defendants (1) entered 
into a contract, combination, or conspiracy that eliminated competition 
among physicians and reduced or limited the development of managed care 
plans in violation of Section 1 of the Sherman Act, 15 U.S.C. 1; and 
defendant Woman's Hospital (2) attempted to maintain its monopoly in 
inpatient obstetrical services, with the specific intent to do so, and 
(3) willfully maintained its monopoly in inpatient obstetrical services 
in violation of Section 2 of the Sherman Act, 15 U.S.C. 2.

III

Explanation of the Proposed Final Judgment

    The proposed Final Judgment is intended to restore to Baton Rouge 
consumers of obstetrical services the benefits of competition among 
obstetrical providers that defendants have eliminated or prevented. At 
the same time, the proposed Final Judgment takes into account any 
benefits to consumers that Woman's Hospital and Woman's medical staff 
may offer through collective marketing of their services by permitting 
such collective action that is unlikely to reduce competition among the 
physicians or prevent competition between Woman's Hospital and other 
hospitals.

A. Scope of the Proposed Final Judgment

    Section III of the proposed Final Judgment provides that the Final 
Judgment shall apply to defendants, to all ``consenting physicians,'' 
and to all other persons who receive actual notice of the proposed 
Final Judgment by personal service or otherwise and then participate in 
active concert with any defendant. The proposed Final Judgment applies 
to Woman's Hospital, WPHO, and all ``consenting physicians'' defined as 
physicians who remain or become owners or participants in physician 
networks owned or operated by Woman's Hospital or WPHO.

B. Prohibitions and Obligations

    Sections IV and V of the proposed Final Judgment contain the 
substantive provisions of the Judgment.
    In Section IV(A), Woman's Hospital and WPHO are enjoined from 
setting, negotiating, or expressing views on, prices or other 
competitive terms and conditions, for competing physicians.

[[Page 21495]]

Women's Hospital and WPHO are further enjoined from owning an interest 
in, contracting, with, or controlling any organization in which 
participating physicians constitute more than 30% of the physicians in 
any relevant market. Section IV(D), however, permits Woman's Hospital 
and WPHO to use a messenger model, and, provided they obtain the prior 
written approval of the Department of Justice, to form and operate a 
Qualified Managed Care Plan (``QMCP'')--as defined in the proposed 
Final Judgment and discussed below. Section IV(A) also prohibits 
Woman's Hospital and WPHO from precluding or discouraging any physician 
from contracting with any payer, or providing incentives for, or 
agreeing with, any physician not to deal with competitors of Woman's 
Hospital or WPHO. Nothing in Section IV(A), however, prohibits Woman's 
Hospital from entering into exclusive contracts for anesthesiology, 
radiology, pathology, neonatalogy, and perinatalogy services to the 
extent reasonably necessary to assure quality of care at the Hospital.
    In addition, Section IV(A) enjoins Woman's Hospital and WPHO from 
disclosing to any physician financial or other competitively sensitive 
business information about any competing physicians. An exception 
permits disclosure of such information if reasonably necessary for the 
operation of an approved QMCP, or if the information is already 
generally available to the medical community or the public. Section 
IV(C) also permits the exchange of information pursuant to the 
Antitrust Safety Zones delineated in Statements 5 and 6 of the 1994 
Statements of Enforcement Policy and Analytical Principles Relating to 
Health Care and Antitrust (``Health Care Policy Statements'').\1\
---------------------------------------------------------------------------

    \1\ 4 Trade Reg. Rep. (CCH) para. 13,152 at 20,782, 20,784.
---------------------------------------------------------------------------

    Section IV(B) enjoins each ``consenting physician'' from owning an 
interest or participating in any organization, connected in any way 
with Woman's Hospital or WPHO, that directly or through any agent, 
organization or other third party, sets, expresses views on, or conveys 
information on prices or other terms and conditions, or negotiatees for 
competing physicians, unless that organization complies with Section 
IV(A). Section IV(B) further enjoins ``consenting physicians'' from 
participating in or facilitating any agreement among competing 
physicians on fees or other terms and conditions for physician 
services, including the willingness of physicians to contract on any 
terms with particular payers, or to use facilities competing with 
Woman's Hospital's facilities, unless the competing physicians share 
substantial financial risk and and the agreement is ancillary to the 
shared risk. However, noting in Section IV(B) applies to the 
participation of competing physicians in any managed care plan or 
network of such plan not owned or controlled by Woman's Hospital or 
WPHO.
    Section IV(C) enjoins Woman's Hospital from agreeing with any 
person affiliated directly or indirectly with any potential or actual 
competing facility or allocate or divide the market, or set the price, 
for any service, including offering lower rates for inpatient services 
to any payer on the condition that the payer or any person affiliated 
with the payer not offer inpatient obstetrical services.
    Section V of the proposed Final Judgment contains additional 
provisions regarding Woman's Hospital and WPHO. Section V(A) requires 
Woman's Hospital and WPHO to notify in writing participating physicians 
annually that they are free to communicate, negotiate or contract on 
any terms with any payer independently from, and without consultation 
with, WPHO. Similarly, Sections V(C) and V(D) require Women's Hospital 
and WPHO to notify in writing each payer with whom WPHO has a contract, 
and during the term of the Final Judgment, each payer when it initially 
discusses using the services of a messenger or contracting with a QMCP 
subject to this Final Judgment, that each participating physician is 
free to communicate, negotiate or contract with such payer on any terms 
independently from, and without consultation with, WPHO, the messenger, 
or the QMCP.
    Under Section V(B), Woman's Hospital and WPHO are required to, 
while forming or employing a messenger model or forming a QMCP, (1) 
provide a copy of the Final Judgment to each owner or member of the 
organization forming the messenger or QMCP and to each physician 
applying for participation in the messenger model, and (2) require as a 
condition precedent to the physician's ownership or membership in the 
organization, or participation in a messenger model, the physician to 
affirm in writing that the physician has read and understands the Final 
Judgment and agrees to be bound by it.
    Section V(E) provides that each defendant must notify the Antitrust 
Division of the United States Department of Justice of any proposed 
change in corporate structure at least 30 days before that change to 
the extent the change may affect compliance obligations arising out of 
the proposed Final Judgment.
    Section VI of the proposed Final Judgment requires defendants to 
implement a judgment compliance program. Section VI(A) requires that 
within 60 days of entry of the Final Judgment, defendants must provide 
a copy of the proposed Final Judgment and the Competitive Impact 
Statement to all directors and officers. Sections VI (B) and (C) 
require defendants to provide a copy of the proposed Final Judgment and 
Competitive Impact Statement to persons who assume those positions in 
the future and to brief such persons annually on the meaning and 
requirements of the proposed Final Judgment and the antitrust laws, 
including penalties for violating them. Section VI(D) requires 
defendants to maintain records of such persons' annual written 
certifications indicating that they (1) have read, understand, and 
agree to abide by the terms of the proposed Final Judgment, (2) 
understand that their noncompliance with the proposed Final Judgment 
may result in conviction for criminal contempt of court, and 
imprisonment, and/or fine, and (3) have reported any violation of the 
proposed Final Judgment of which they are aware to counsel for 
defendants. Section VI(E) requires defendants to maintain for 
inspection by the Antitrust Division a record of recipients to whom the 
proposed Final Judgment and Competitive Impact Statement have been 
distributed and from whom annual written certifications regarding the 
proposed Final Judgment have been received.
    The proposed Final Judgment also contains provisions in Section VII 
requiring defendants to certify their compliance with specified 
obligations of Section VI(A) of the proposed Final Judgment. Section 
VIII of the proposed Final Judgment sets forth a series of measures by 
which the Antitrust Division may have access to information needed to 
determine or secure defendants' compliance with the proposed Final 
Judgment.
    Finally, Section X states that the Judgment expires ten years from 
the date of entry.

C. Effect of the Proposed Final Judgment on Competition

    The proposed Final Judgment remedies, and prevents recurrence of, 
violations of Sections 1 and 2 of the Sherman Act. Defendant Woman's 
Hospital violated Section 2 by attempting to maintain and maintaining 
its monopoly in inpatient obstetrical services. Woman's Hospital and 
WPHO

[[Page 21496]]

violated Section 1 by entering into an agreement with OB/GYNs on 
Woman's Hospital's medical staff that unreasonably restrained 
competition among the OB/GYNs and prevented significant competition 
from developing in the market for inpatient obstetrical services.

1. Competition for Inpatient Obstetric Services

    Woman's Hospital violated Section 2 by depriving Baton Rouge health 
care consumers of the significant benefits from competition for 
inpatient obstetric business between Woman's Hospital and General 
Health's Health Center. Some competition started to develop with the 
entry of General Health and another Baton Rouge hospital, causing 
Woman's Hospital to waive direct payments by women who expressed a 
desire to deliver at one of the competing facilities. Woman's Hospital, 
in the minutes of the first meeting of its Strategic Planning Committee 
in 1994, articulated its concern that competition from General Health 
might cause more significant competition in the form of ``deep 
discounting'' of the rates charged to managed care plans for 
deliveries.
    In response to that concern, Woman's Hospital tried to prevent the 
development of competing obstetric facilities in Baton Rouge. Woman's 
Hospital attempted first to prevent General Health from entering the 
market by offering to continue contracting with Gulf South, General 
Health's wholly owned managed care plan, if General Health did not 
enter the market. Though General Health ultimately did not accept 
Woman's Hospital's offer, Woman's Hospital could realistically seek the 
same type of agreement in the future. Woman's Hospital and General 
Health have an ongoing relationship through Woman's participation in 
the Gulf South provider network and both Woman's Hospital and General 
Health might find it in their mutual self interest to eliminate 
competition in inpatient obstetrics. Accordingly, Section IV(C) of the 
proposed Final Judgment prohibits Woman's Hospital from pursuing this 
type of anticompetitive conduct in the future.
    Woman's Hospital succeeded in preventing the development of 
inpatient obstetrical competition through the formation of WPHO. By 
organizing WPHO, Woman's Hospital created a vehicle for the OB/GYNs on 
its medical staff to wield market power. Creation of market power for 
such a group of physicians would not normally further a hospital's 
interests and could, in some circumstances, work against its interests. 
Accordingly, Woman's Hospital would not have organized the physicians 
toward this end, absent Woman's interest in preventing the development 
of inpatient obstetrical competition.
    Woman's Hospital's organization of WPHO furthered this interest of 
Woman's Hospital by substantially limiting the ability of managed care 
plans to steer patients to General Health's facility. Managed care 
plans had successfully selectively contracted with OB/GYNs in the 
competitive market that existed before the formation of WPHO. The 
formation of WPHO deprived plans of the opportunity to use competition 
among the OB/GYNs to induce the OB/GYNs to admit patients to General 
Health's facility. The proposed Final Judgment, as discussed in the 
next section, restores the competitive market by preventing price 
fixing by physicians or their exercise of market power.

2. Competition Among OB/GYNs and Other Physicians

    The agreement among Woman's Hospital, WPHO and the WPHO OB/GYNs 
unreasonably restrained competition among the OB/GYNs and competition 
among hospitals for inpatient obstetrical business. The agreement 
constitutes a per se violation of Section 1 because of its naked 
purpose and effect of reducing price competition among the OB/GYNs. The 
agreement's reduction of competition among the OB/GYNs and among 
hospitals, without any substantial offsetting benefit, establishes a 
violation of Section 1 under the rule of reason, as well.
a. The Contract, Combination or Conspiracy in Restraint of Trade
    The full scope of the unlawful conspiracy charged in this case is 
not confined to the four corners of the documents incorporating WPHO or 
signed by Woman's Hospital and members of its medical staff. Rather, 
the facts alleged in the Complaint establish a broader understanding 
among competing OB/GYNs to restrain price competition among themselves 
by contracting either through WPHO at or above the minimum WPHO fee 
schedule or individually on the same basis.2
---------------------------------------------------------------------------

    \2\ The existence of this agreement made it unnecessary for the 
Department to resolve whether physician representation on the board 
of WPHO, physician influence over Woman's Hospital, or other factors 
established that competing doctors controlled the establishment of 
their fees through WPHO and thus established an agreement among 
those competitors.
---------------------------------------------------------------------------

    Woman's Hospital orchestrated the formation of WPHO through a 
number of general meetings with its medical staff, including the OB/
GYNs. The Hospital solicited the OB/GYNs' preliminary commitment to 
WPHO and their final agreement to the fee schedule through memoranda 
addressed to all members of the medical staff.
    The proposal to form WPHO necessarily carried with it the 
understanding that a substantial percentage, if not all, of the OB/GYNs 
would present a united front to managed care plans and other payers on 
terms established through WPHO. Each OB/GYN's agreement to permit WPHO 
to negotiate on that doctor's behalf would have been useless at best, 
or actually harmful, to the doctor without an understanding that most 
would not contract independently of WPHO at rates below WPHO's minimum 
fee schedule. WPHO was proposing a broader panel and higher fees than 
managed care plans had already obtained through individual contracts 
with OB/GYNs. Neither Woman's Hospital nor the OB/GYNs could 
realistically have believed that the plans would have agreed with WPHO 
to increase fees to OB/GYNs and include additional OB/GYNs in their 
panels absent an understanding that the physicians would not continue 
to contract individually at competitive rates.
    Participating OB/GYNs had substantial reasons to expect that WPHO 
would further their understanding to eliminate price competition. Their 
interest in not competing with each other was aligned with Woman's 
Hospital's interest in not competing with the Health Center. Woman's 
Hospital and the OB/GYNs appointed 12 of the 14 Directors to WPHO's 
Board of Directors, thus assuring that WPHO would pursue higher OB/GYN 
fees and resist contractual terms that could induce the OB/GYNs to make 
use of General Health's new inpatient obstetric facility.
    Knowing that concerted action was contemplated and invited, each 
OB/GYN gave adherence to WPHO and participated in it. Each OB/GYN was 
well aware that others were asked to participate; each knew that 
cooperation was essential to successful operation of WPHO; each knew 
that WPHO, if successful, would result in an elimination of competition 
among OB/GYNs; and knowing that, each committed to WPHO and authorized 
WPHO to contract on their behalf.3 In

[[Page 21497]]

short, an agreement among OB/GYNs to restrain price competition among 
themselves is shown by the nature of the market for OB/GYNs' services 
existing before formation of WPHO, the purposes for which WPHO was 
formed, and the manner in which it was formed. See Interstate Circuit, 
Inc. v. United States, 306 U.S. 208, 226-27 (1939); In re Chain 
Pharmacy Ass'n of New York, Inc., No. 9227, slip op. at 70-71 (FTC 
Initial Decision, filed May 17, 1991).
---------------------------------------------------------------------------

    \3\ WPHO strengthened the ability of the OB/GYNs to police the 
agreement among themselves. There was little likelihood that any 
substantial number of the approximately 45 OB/GYNs who joined WPHO 
could secretly break ranks. Woman's Hospital's monopoly in inpatient 
obstetrics assured Woman's Hospital knowledge of the identity of 
managed care plans operating in Baton Rouge and of the OB/GYNs in 
the networks of those plans. WPHO would thus readily detect any OB/
GYN who contracted outside of WPHO at lower rates. Under these 
circumstances, the agreement of the OB/GYNs did, and was likely to, 
lead to real anticompetitive harm.
---------------------------------------------------------------------------

    The agreement among Woman's Hospital, WPHO, and the WPHO OB/GYNs to 
limit price competition among OB/GYNs was per se unlawful.4 WPHO 
did not develop utilization review standards, and the agreement to 
limit price competition was not reasonably necessary to further any 
efforts by WPHO to encourage physicians to practice more cost-
effectively. No legitimate argument exists, in this case, therefore, 
that the collective pricing of OB/GYNs' services here was ancillary to 
any procompetitive activity.
---------------------------------------------------------------------------

    \4\ The agreement does not escape condemnation simply because 
WPHO appointed a consultant and a committee of nonphysicians to 
determine the fee schedule. The procedure employed by WPHO here is 
sharply distinguishable from a properly structured messenger model, 
discussed infra and permitted under the proposed Final Judgment. 
Here, a single agent was used precisely to fix fees to be charged to 
managed care plans by all of WPHO's member doctors, not simply to 
convey information.
---------------------------------------------------------------------------

    Defendants and WPHO physicians collectively obtained higher fees 
for OB/GYNs, deprived managed care plans of the ability to selectively 
contract with OB/GYNs, and prevented the development of competition for 
inpatient obstetrical services. These anticompetitive effects were not 
offset by any procompetitive effect. Thus, even under a rule of reason 
analysis, defendants violated Section 1 of the Sherman Act.
    As discussed above, Sections IV (A) and (B) of the proposed Final 
Judgment prevent the continuation or recurrence of defendants' price 
fixing activity and exercise of market power by enjoining Woman's 
Hospital and WPHO from, directly or indirectly, negotiating or setting 
prices or other competitive terms and conditions for competing 
physicians and from disclosing financial or other competitively 
sensitive information about competing physicians. The requirements of 
the proposed Final Judgment should restore and protect competition 
among physicians and permit the development of competition for 
inpatient obstetrical services in Baton Rouge.
b. Permitted Conduct
    Section IV(D) of the Judgment describes two circumstances in which 
WPHO or similar organizations subject to the Judgment may participate 
in the contracting activities of competing physicians: first, by using 
a ``messenger model,'' a term defined in the proposed Final Judgment; 
second, by obtaining approval from the Department of Justice to own and 
operate a QMCP.
i. The Messenger Model
    The proposed Final Judgment permits WPHO to use an agent or third 
party to facilitate the transfer of information concerning prices and 
other competitively sensitive information between individual physicians 
and purchasers of physician services.\5\ Appropriately designed and 
administered, such messenger models rarely present substantial 
competitive concerns and indeed have the potential to reduce the 
transaction costs of negotiations between health plans and numerous 
physicians.
---------------------------------------------------------------------------

    \5\ ``Other competitively sensitive terms and conditions'' 
includes, for example, contractual terms concerning utilization 
review and quality assurance issues.
---------------------------------------------------------------------------

    The proposed Final Judgment makes clear that the critical feature 
of a properly devised and operated messenger model is the individual 
providers make their own separate decisions about whether to accept or 
reject a purchaser's proposal, independent of other physicians' 
decisions and without any influence by the messenger (Section II(C)) 
The messenger may not, under the proposed Judgment, coordinate 
individual providers' responses to a particular proposal, disseminate 
to physicians the messenger's or other physicians' views or intentions 
concerning the proposal, act as an agent for collective negotiation and 
agreement, or otherwise serve to facilitate collusive behavior.\6\ The 
proper role of messenger is simply to facilitate the transfer of 
information between purchasers of physician services and individual 
physicians or physician group practices and not to coordinate or 
otherwise influence the physicians' decision-making processes.\7\
---------------------------------------------------------------------------

    \6\ For example, it would be a violation of the proposed Final 
Judgment if the messenger were to select a fee for a particular 
procedure from a range of fees previously authorized by the 
individual physician, or if the messenger were to convey collective 
price offers from physicians to purchasers or negotiate collective 
agreements with purchasers on behalf of physicians. This would be so 
even if individual physicians were given the opportunity to ``opt 
in'' or to ``opt out'' of any agreement. In each instance, it would 
in fact be the messenger, not the individual physician, who would be 
making the critical decision, and the purchaser would be faced with 
the prospect of a collective response.
    \7\ For Example, the messenger may convey to a physician 
objective or empirical information about proposed contract terms, 
convey to a purchaser any individual physician's acceptance or 
rejection of a contract offer, canvass member physicians for the 
rates at which each would be willing to contract even before a 
purchaser's offer is made, and charge a reasonable, non-
discriminatory fee for messenger services. The proposal Final 
Judgment gives guidelines for these and other activities that a 
messenger may undertake without violating the Final Judgment. 
(Section II(C)).
---------------------------------------------------------------------------

ii. The Qualified Managed Care Plan
    The proposed Final Judgment provides defendants with the 
opportunity to seek approval from the Department of Justice to operate 
a QMCP. The requirement of prior approval by the Department was 
necessary for several reasons. First, because a QMCP, in contrast with 
a messenger model, allows for some collective decision-making among 
competitors, the Department must look carefully at the potential for a 
QMCP to result in anticompetitive behavior. In this case, the 
Department was particularly concerned that past behavior indicated a 
potential for physician boycott of new entrants into the inpatient 
obstetrics market. Indeed, managed care plans have been deprived of 
benefits of competition in the market for inpatient obstetrical 
services because OB/GYNs have refused to deliver at the Health Center. 
In addition, the Department perceived there to be a greater potential 
for abuse of a QMCP operated by a single specialty with very closely 
aligned interests. Finally, there was no indication that the operation 
of a QMCP by defendants in this case would have any pro-competitive 
benefits. Specifically, Woman's Hospital and WPHO did not indicate that 
their motivation for operating a QMCP was to offer their community a 
locally owned and operated managed care plan, a factor that has been an 
important consideration for the Department in permitting the operation 
of QMCPs in other communities.\8\ In reviewing a request from 
defendants for approval to operate a QMCP, the Department will consider 
the totality of circumstances in light of the concerns discussed above. 
The proposed Final Judgment provides that the Department's approval 
will not

[[Page 21498]]

be withheld unreasonably. (Section IV(D)(I)).
---------------------------------------------------------------------------

    \8\ See United States v. Health Care Partners, Inc., 60 Fed. 
Reg. 52014 (October 4, 1995) (Competitive Impact Statement); United 
States v. Health Choice of Missouri, Inc., 60 Fed. Reg. 51808 
(October 3, 1995) (Competitive Impact Statement).
---------------------------------------------------------------------------

    To comply with the requirements of a QMCP set forth in the proposed 
Final Judgment, (1) the owners or members of WPHO (to the extent they 
compete with other owners or members or compete with physicians on 
their provider panels) must share substantial financial risk, and 
constitute no more than 30% of the physicians in any relevant market; 
\9\ and (2) to the extent WPHO has a provider panel that exceeds this 
limit in any relevant market, there must be a divergence of economic 
interest between the owners and the subcontracting physicians, such 
that the owners have the incentive to bargain down the fees of the 
subcontracting physicians.\10\ (Section II(G) (1) and (2)) In addition, 
a QMCP cannot facilitate agreements between competing physicians 
concerning charges, or other terms and conditions relating to payers 
not contracting with the organization, and cannot be operated with the 
purpose or effect of maintaining or increasing physician fees. (Section 
II(G) (3) and (5)) The requirements of a QMCP are necessary to avoid 
the creation of a physician cartel while at the same time allowing 
payers access to provider-controlled plans.
---------------------------------------------------------------------------

    \9\ The financial risk-sharing requirement of a QMCP ensures 
that the physician owners in the venture share a clear economic 
incentive to achieve substantial cost savings and provide better 
services at lower prices to consumers. The 30% limitation is 
designed to ensure that there are available sufficient remaining 
physicians in the market with the incentive to contract with 
competing managed care plans or to form their own plans. These 
limitations are particularly critical in this case in view of 
defendants' prior conduct in forming negotiating groups with nearly 
every OB/GYN practicing at private hospitals in Baton Rouge and 
obtaining higher prices for these doctors.
    \10\ The QMCP's subcontracting requirements are designed to 
permit physician panels above the 30% limit, but with sufficient 
safeguards to avoid the risk of competitive harm. Specifically, the 
owners of a QMCP must bear significant financial risk for the 
payments to, and utilization practices of, the panel physicians in 
excess of the 30% limitation. In this way, a QMCP must operate with 
the same incentives as a nonprovider-controlled plan to bargain down 
the fees of the subcontracting physicians, and the risk of it using 
the subcontracts as a mechanism for increasing fees for physician 
services is substantially reduced.
---------------------------------------------------------------------------

3. Applicability to Consenting Physicians

    The proposed Final Judgment applies not only to named defendants 
Woman's Hospital and WPHO, but also to all ``consenting physicians'' 
defined as physicians who continue as owners or participants in 
physician networks owned or operated by Woman's Hospital or WPHO. 
Consenting physicians are required to affirm in writing that the 
physician has read and understands the Final Judgment and agrees to be 
bound by it. (Section IV(B)).
    Application of the proposed Final Judgment to consenting physicians 
will help prevent recurrence of the violations alleged in the 
Complaint. Those violations could not have occurred without the willing 
participation of physicians who, in addition to Woman's Hospital, were 
the intended beneficiaries of those violations. Physicians could abuse 
the messenger model and the QMCP in ways that might not violate the 
Final Judgment but would at the same time achieve the anticompetitive 
results addressed by the Final Judgment. The ``consenting physicians'' 
provisions should reduce this risk.

IV

Alternative to the Proposed Final Judgment

    The alternative to the proposed Final Judgment would be a full 
trial on the merits of the case. In the view of the Department of 
Justice, such a trial would involve substantial costs to the United 
States and defendants and is not warranted because the proposed Final 
Judgment provides all of the relief necessary to remedy the violations 
of the Sherman Act alleged in the Complaint.

V

Remedies Available to Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages suffered, as well as costs and a reasonable attorney's fee. 
Entry of the proposed Final Judgment will neither impair nor assist in 
the bringing of such actions. Under the provisions of Section 5(a) of 
the Clayton Act, 15 U.S.C. 16(a), the proposed Final Judgment has no 
prima facie effect in any subsequent lawsuits that may be brought 
against one or more defendants in this matter.

VI

Procedures Available for Modification of the Proposed Final Judgment

    As provided by Sections 2 (b) and (d) of the APPA, 15 U.S.C. 16 (b) 
and (d), any person believing that the proposed Final Judgment should 
be modified may submit written comments to Gail Kursh, Chief; Health 
Care Task Force; United States Department of Justice; Antitrust 
Division; 325 7th Street, NW., Room 400; Washington, DC 20530, within 
the 60-day period provided by the Act. Comments received, and the 
Government's responses to them, will be filed with the Court and 
published in the Federal Register. All comments will be given due 
consideration by the Department of Justice, which remains free, 
pursuant to Paragraph 2 of the Stipulation, to withdraw its consent to 
the proposed Final Judgment at any time before its entry, if the 
Department should determine that some modification of the Final 
Judgment is necessary for the public interest. Moreover, the proposed 
Final Judgment provides in Section IX that the Court will retain 
jurisdiction over this action, and that the parties may apply to the 
Court for such orders as may be necessary or appropriate for the 
modification, interpretation, or enforcement of the proposed Final 
Judgment.

VII

Determinative Documents

    No materials and documents of the type described in Section 2(b) of 
the APPA, 15 U.S.C. 16(b), were considered in formulating the proposed 
Final Judgment. Consequently, none are filed herewith.

    Dated: April 23, 1996.

Respectfully submitted,
----------------------------------------------------------------------
Mark J. Botti,
Steven Kramer,
Pamela C. Girardi,
Attorneys, Antitrust Division, U.S. Dept. of Justice, 325 7th 
Street, N.W., Room 450, Washington, D.C. 20530, (202) 307-0827.

L.J. Hymel,
United States Attorney.

By:--------------------------------------------------------------------
John J. Gaupp,
LBN# 14976, Assistant United States Attorney, 777 Florida St., Suite 
208, Baton Rouge, LA 70801, (504) 389-0443, Local Counsel.
[FR Doc. 96-11796 Filed 5-9-96; 8:45 am]
BILLING CODE 4410-01-M